The reasons for the rising in aluminum price

  Recently, aluminum price has been rising like a horse running, constantly refreshing market perceptions. The crazy of aluminum price breaks through the psychological expectations of downstream companies one after another, causing many companies that use aluminum alloy as raw materials to complain. Why does aluminum price continue to rise?  The problem is capital fueling the flames or the uneven market supply and demand?

1. The imbalance between supply and demand is the internal cause of higher aluminum prices

According to experiments conducted by international research institutes, replacing traditional steel with aluminum to manufacture automobiles can reduce the weight of the entire vehicle by 30% to 40%; using aluminum to manufacture engines can reduce weight by 30%; aluminum radiators are 20% lighter than the same copper products 20% to 40%; the aluminum car body is more than 40% lighter than the original steel products. Therefore, using aluminum instead of steel makes cars has a significant weight reduction effect.

The latest data from the World Metal Statistics Bureau shows that the global aluminum market will have a supply shortage of 655,000 tons from January to August 2021. In 2020, there were an oversupply of 1.174 million tons. In May 2021, the global aluminum market consumption was 6.0565 million tons. From January to August of 2021, global aluminum demand was 29.29 million tons, compared with 26.545 million tons in the same period last year, an increase of 2.745 million tons year-on-year. Global aluminum production in May 2021 was 5.7987 million tons, an increase of 5.5% year-on-year. As of the end of August 2021, the global aluminum market inventory was 233 thousand tons.

While the supply-side kinetic energy is seriously sluggish, the demand-side is strong. According to data from the Passenger Association, the retail sales of new energy vehicles and passenger vehicles in China reached 249,000 in August this year, a year-on-year increase of 167.5% and a month-on-month increase of 12.0%. From January to August, the retail sales of new energy vehicles were 1.479 million, a year-on-year increase of 202.1%. The explosive growth in sales of new energy vehicles has led to a very strong demand for aluminum in the market and severely inverted supply and demand capacity, which has further pushed up aluminum prices.

   

  In the face of the explosive growth of new energy vehicle sales and the increasing demand for aluminum structural parts under the trend of light-weighting, the global aluminum market, which was originally affected by the epidemic, is "stretched".

  In the next period of time, the price of aluminum will continue to rise. On the one hand, domestic scrap aluminum inventory is relatively low; on the other hand, domestic scrap aluminum production is relatively reduced due to the epidemic; if there is no external approval for large amounts of scrap aluminum to supply the market , Then, aluminum price and scrap aluminum price may remain high for a period.

2. Electricity and production restrictions, rising freight rates, and increasing aluminum shortages

  Since the beginning of 2021, the shortage of electricity supply across the country, especially in Yunnan and Guangxi, has severely affected the domestic electrolytic aluminum supply. The reduction in production due to power curtailment was 1.234 million tons. Recently, the impact of power curtailment in Guangxi is still deepening, and the scale of electrolytic aluminum production reduction may expand. At the same time, the consumer side shows strong resilience, and off-season inventories continue to deplete to a lower level, so aluminum price continues to rise.

  Affected by the global epidemic in August, global bauxite shipping costs increased. According to media statistics, the freight rate for Guinea capesize ships to Shandong port is about US$30/dry ton, which is an increase of US$3/dry ton comparing to the previous period; the freight rate of capesize vessels in Indonesia has risen by US$3/dry ton, and the price is US$15/dry ton. The freight rate of Turkish capesize vessels increased by US$2/dry ton, and the price was US$29/dry ton. The freight rate for Malaysia Super Handysize is about US$19/dry ton, the freight rate for Australia Panamax is about US$19/dry ton, and the freight rate for Montenegro Panamax is US$47/ton.

  The leak happened in the evening rain, and the boat was late and hit the wind. On the September 5, the coup in Guinea triggered worries about the supply of bauxite, which undoubtedly aggravated the rise in aluminum price. With the increase in the price of imported ore, the domestic ore market has become more active than before. The export of Guinea bauxite is very important to China and the world. There is no news to prove that the coup will affect the export of Chinese companies and bauxite in Guinea. However, in this eventful autumn, the incident is a record high since 2006. Aluminum price and the hot alumina market provide new upward momentum.

  Move the whole body by pulling a hair. Domestically, due to the persistently rise in aluminum price and limited growth in raw material scrap aluminum, expectations are low. In near future, concerning about the shortage of scrap aluminum supply will intensify. Therefore, on the September 9th, the ADC12 of Baotai's emerging companies raised 400 yuan/ton in one day. In the foreign countries, the import of scrap aluminum is progressing slowly. It is reported that only the port of Canton has imported scrap aluminum. A large company expects that about 20,000 tons of aluminum scrap hoarded in Hong Kong will arrive in January. Therefore, it is difficult to see a large amount of imported aluminum scrap entering the country in the short term, especially in December.

3. the price of silicon has skyrocketed, and the price of recycled aluminum has reached a new height.

  The soaring silicon price has triggered a chain reaction downstream of the industrial chain. The effect is transmitted all the way to secondary aluminum, aluminum alloy and other fields. The soaring price of silicon has driven the cost of secondary aluminum alloys to increase significantly. Although the downstream demand is not strong and the transaction is average, the price of secondary aluminum is still rising due to the cost.

  According to SMM news, the price of aluminum and silicon is upside down, and the price difference has widened to more than 5,000 yuan/ton. The downstream aluminum alloy enterprises are under pressure. The raw material silicon metal is mainly purchased in small batches, and the silicon inventory is maintained at around 20 days. Loss-making companies began to adjust aluminum alloy ingot processing fees to ease cost pressures.    Among them, the A356 aluminum alloy factory processing fees signed in the form of monthly orders were adjusted to around 1,000 yuan/ton, an increase of 500-600 yuan/ton from the previous month, and annual orders The companies that signed the formalities are also actively coordinating and hoping to reduce the losses caused by rising costs.

  The supply of silicon materials (yield and inventory) has been exhausted in a relatively short period of time, and the market continues to change in the direction of short supply. Therefore, the price of silicon materials continues to rise. Up to now, 12 domestic polysilicon companies have no corporate maintenance. It is expected that domestic polysilicon production may reach a new height in September, which is expected to be between 43,000 and 44,000 tons. Sufficient downstream orders will stimulate silicon wafer companies to continue to increase their purchasing demand to ensure their high operating rates. Therefore, in the short term, the state of the polysilicon market will gradually transition from tight supply and demand to short supply, which will further support the continued rise in silicon material prices.

  Based on the above internal and external factors, the cost of the entire aluminum processing industry from raw materials, transportation, cost and other links is rising, and there is a large gap in the aluminum market supply field. At present, the rise in aluminum price is forecasted to continue to rise.

 

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